Korea`s facility-related spending dips at sharpest pace in 8 years

SEOUL, Oct. 21 (Yonhap) -- South Korea's spending on facilities declined at the
sharpest pace in the first half in eight years, data by the central bank showed
Wednesday, pointing to still-weak economic fundamentals.
The country's capital spending on a nominal term reached 43.8 trillion won
(US$37.2 billion) in the January-June period, down 6.1 percent from the same
period of last year, according to the Bank of Korea (BOK). The first-half figures
marked the steepest decline since a 7.6-percent annual shrinkage recorded in the
first half of 2001, it added.
The Korean economy, Asia's fourth-largest, grew 2.6 percent in the second quarter
from three months earlier, the fastest quarterly growth in more than five years,
on the back of economic stimulus packages.
Despite growing prospects for an economic recovery, the local job market and
facility investment are still not on a firm footing.
Economists said that still-weak corporate capital spending is feared to deter the
job market from recovering fast, hurting South Korea's potential economic growth.
Analysts said South Korea's potential economic growth rate, or the maximum
possible rate at which an economy can grow without triggering inflation, is
likely to fall to the 3-percent range this year because of flaccid corporate
investment and consumer spending.
The potential growth rate had remained in the range of 4.5-5 percent until 2007.
sooyeon@yna.co.kr
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